The announcement came shortly after the Department of Education levied a $29.7 million fine on the company's Heald College system for allegedly inflating the job-placement statistics of graduates. On top of that, the California Bureau for Private Postsecondary Education had ordered Corinthian to stop enrolling new students at two locations in California.

Potential outcomes

The loan forgiveness may have a lasting impact on who is eligible for such relief.

"If the department goes overboard in forgiving loans, it could undermine the financial and political viability of the student-loan system," says David Bergeron, senior fellow at the Center for American Progress, a left-leaning think tank.

Yet others say the threat of widespread demand for loan discharges is unrealistic. The major issue stems instead from what standard of proof the Education Department will require for loan forgiveness. For example, multiple for-profit college companies have settled out of court with state attorneys generals—but the settlement language does not contain confessions of wrongdoing. Whether or not those may be used to grant a loan discharge remains to be seen.

Some say they are concerned the Education Department's dual role of protecting students and saving taxpayers' money may be at odds.

Yet Warren says she remains unconcerned. "If they don't want taxpayers to pay for dischargers when students get cheated, [department officials] should invest the time and resources early to make sure predatory schools never cheat those students in the first place" (Blumenstyk, The Chronicle of Higher Education, 6/18 [subscription required]).

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